Business Context and Reporting Period
Dolphin Digital Media, Inc. (formerly Dolphin Entertainment, Inc.) filed this Form 8-K on August 10, 2011, to announce a material restatement of its previously issued financial statements for the three-month period ended March 31, 2011. The restatement addresses errors in revenue recognition related to the sale of certain software licenses.
Key Financial Metrics and Restatement Effects
The filing details the adjustments required to correct the unaudited consolidated financial statements for the interim period ended March 31, 2011. The primary impact is an increase in revenue and a reduction in the reported net loss.
| Financial Metric | Previously Reported | Effect of Restatement | Restated Amount |
|---|---|---|---|
| Revenue | $13,750 | +$261,250 | $275,000 |
| Net Loss | $(392,377) | +$261,250 | $(131,127) |
| Loss Per Share (Basic & Diluted) | $(0.01) | +$0.01 | $0.00 |
| Deferred Revenue (Balance Sheet) | $439,073 | $(261,250) | $177,823 |
| Accumulated Deficit (Balance Sheet) | $(33,560,606) | +$261,250 | $(33,299,356) |
The filing text does not provide clear values for total debt, liquidity ratios, or operating cash flows beyond the specific line items adjusted for the restatement.
Material Changes Versus Prior Period
The material change is the correction of the Q1 2011 financial results. The company previously under-recognized revenue by $261,250. Consequently, the net loss for the period was overstated by the same amount. The restatement reduces the accumulated deficit and decreases the deferred revenue liability on the balance sheet.
Guidance, Outlook, and Management Commentary
Management, including the CEO and CFO, has discussed the restatement with the company's independent accountant. The company intends to file an amended Form 10-Q for the interim period ended March 31, 2011, as soon as practical following this filing. The filing does not contain forward-looking guidance, risk factors, or commentary on future operations beyond the immediate accounting correction.
Key Facts for Investor Verification
- Verify the upcoming amended Form 10-Q for the period ended March 31, 2011, to confirm the restated figures.
- Review the specific criteria used for the new revenue recognition policy regarding software license sales.
- Confirm the impact of the restatement on the company's compliance with any debt covenants or listing requirements.
- Monitor for any further disclosures regarding internal control weaknesses that led to the revenue recognition error.